ROBERT NEWMAN, Plаintiff and Appellant, v. EMERSON RADIO CORPORATION, Defendant and Respondent.
No. S009325. L.A. No. 32284.
Supreme Court of California
May 25, 1989.
48 Cal. 3d 973
LUCAS, C. J.
Stuart F. Lichterman, Charlotte E. Costan and Lichterman & Traister for Plaintiff and Appellant.
Sklar & Coben, Daniel M. Sklar, Farnsworth, Saperstein & Seligman, Guy T. Saperstein, Brad Seligman, Elaine B. Feingold, Dale Brodsky, William Quackenbush, Richard D. Aldrich, Harry R. Levine, Joseph Posner, Joan Graff, Ian Herzog, Leonard Sacks, Gary Gwilliam, Robert Steinberg, Sanford Gage, Roland Wrinkle, Douglas Devries, Bruce Broillett and Evan Marshall as Amici Curiae on behalf of Plaintiff and Appellant.
Welter & Greene, Arak, Welter, Snipper & Greene and Richard J. Greene for Defendant and Respondent.
Proskauer, Rose, Goetz & Mendelsohn, Jeffrey A. Berman, Steven G. Drapkin, Scott J. Witlin, Paul, Hastings, Janofsky & Walker, Paul Grossman, Jennifer A. Glazer, Orrick, Herrington & Sutcliffe, Ralph H. Baxter, Jr., Donald L. Cornwell, Margaret G. Lodise, Pettit & Martin, Linda Auerbach Allderdice, Thomas H. Petrides, Mary C. St. John, Michael J. Breining, Horvitz & Levy, Ellis J. Horvitz, Daniel J. Gonzalez, S. Thomas Todd, Latham & Watkins, Max L. Gillam, Milton A. Miller, Reba W. Thomas, Gibson, Dunn & Crutcher, David A. Cathcart, David W. Burcham, Gary M. Roberts, Dennis A. Gladwell, J. Kevin Lilly, Timothy Y. Wong, Ray R. Goldie and James E. Chaddock as Amici Curiae on behalf of Defendant and Respondent.
OPINION
LUCAS, C. J.-In Foley v. Interactive Data Corp. (1988) 47 Cal.3d 654 [254 Cal.Rptr. 211, 765 P.2d 373], we held that in the context of an alleged
We did not in Foley address the retroactive application of our opinion, leaving that issue for a later case in which it could be addressed specifically by the parties. (47 Cal.3d at p. 700, fn. 43.) Pursuant to our order under
Plaintiff focuses on our holding limiting the damages for breach of the covenant of good faith and fair dealing to contract remedies. He asserts our conclusion represented an unforeseeable new rule of law and that the policies underlying our decision support its solely prospective application. We will conclude in accordance with the general rules relating to retroactive application of judicial decisions that our opinion should be applied retroactively. There are no compelling policy reasons that persuade us we should depart from our usual approach in tort cases.
I. FACTS
Plaintiff filed an action alleging that he had been hired by defendant on September 3, 1972, and discharged on May 11, 1982, without good cause. In his complaint, plaintiff asserted that, during the course of his employment, the parties orally agreed that plaintiff‘s employment would continue until some act occurred which gave rise to good or just cause for his termination. Moreover, in the event of such cause, plaintiff would be notified thereof and given an opportunity to rectify or eliminate it. This oral agreement was manifested by plaintiff‘s longevity of service, defendant‘s stated policies regarding termination procedures, and defendant‘s actions toward and communications with plaintiff regarding his employment status and its continuation. In his first cause of action, plaintiff asserted that despite this agreement, defendant discharged him, allegedly without good cause and arbitrarily and in breach of the implied contract. In his second
On the eve of trial, the court heard defendant‘s motion in limine to exclude plaintiff‘s evidence, citing Newfield v. Insurance Co. of the West (1984) 156 Cal.App.3d 440 [203 Cal.Rptr. 9] and Santa Monica Hospital v. Superior Court (1985) 204 Cal.App.3d 28, review granted Jan. 16, 1986 (L.A. 32148). The Court of Appeal for the Second Appellate District held in both Santa Monica Hospital and Newfield that the plaintiffs’ actions based on oral contracts of employment were barred by the statute of frauds. During argument on the in limine motion in this case, the parties stipulated to the following facts: (1) plaintiff‘s employment with the company began in September 1972 and was terminated on May 11, 1982; (2) during his employment, plaintiff received seven pay raises of which three were merit increases; (3) plaintiff‘s last рosition was probationary; (4) plaintiff “received substantial pay in a pension profit sharing and stock option benefit plan“; (5) plaintiff was given no notice of dissatisfaction with his work before he was terminated; and (6) the company policy was not to give notice of dissatisfaction before termination and plaintiff himself had discharged employees without giving them prior notice. The trial court stated that it found the Santa Monica Hospital case “entirely dispositive,” granted the motion, and entered judgment dismissing plaintiff‘s case.
Thereafter, the Court of Appeal, reviewing the individual causes of action in a different order than that of the complaint and using as its standard for review whether the allegations of the complaint, even if true, failed to state a cause of action (see 6 Witkin, Cal. Procedure (3d ed. 1985) Proceedings Without Trial, § 272, pp. 571-572), affirmed in part and reversed in part. As to plaintiff‘s cause of action alleging discharge in breach of public policy (Tameny v. Atlantic Richfield Co. (1980) 27 Cal.3d 167 [164 Cal.Rptr. 839, 610 P.2d 1330, 9 A.L.R.4th 314]), the court noted that the language of the complaint was conclusory and, as such, did not give sufficient notice to defendant of the nature of the policy supposedly violated. Nonetheless, the court concluded plaintiff should be given an opportunity to amend his complaint in this regard, and so ordered.
Discussing plaintiff‘s claim for tort relief based on breach of the implied covenant of good faith and fair dealing, the court briefly quoted from Clеary v. American Airlines, Inc. (1980) 111 Cal.App.3d 443, 456 [168 Cal.Rptr.
Finally, after concluding plaintiff had alleged some of the factors supporting a finding of an implied promise not to terminate except for good cause (Pugh v. See‘s Candies, Inc., supra, 116 Cal.App.3d 311), the Court of Appeal nonetheless held plaintiff‘s action was barred by the statute of frauds.
Plaintiff petitioned for review, asserting that the Court of Appeal erred in affirming dismissal of his cause of action seeking tort relief for breach of an implied contract to discharge only for good cause. As noted, we requested the parties to address Foley‘s effect on each of plaintiff‘s causes of action.
II. DISCUSSION
The general rule that judicial decisions are given retroactive effect is basic in our legal tradition. We recently reiterated in Evangelatos v. Superior Court (1988) 44 Cal.3d 1188, 1207 [246 Cal.Rptr. 629, 753 P.2d 585], Justice (now Chief Justiсe) Rehnquist‘s observation that “[t]he principle that statutes operate only prospectively, while judicial decisions operate retrospectively, is familiar to every law student.” (United States v. Security Industrial Bank (1982) 459 U.S. 70, 79 [74 L.Ed.2d 235, 243, 103 S.Ct. 407].)
How did the general rule of retroactivity arise? One early rationale for retroactive application of decisions stemmed from the idea adhered to by Blackstone that “judges do not ‘create,’ but instead ‘find’ the law. A decision interpreting the law, therefore, does no more than declare what the law had always been. An overruling decision, under this theory, also does no more than declare the law-albeit in a more enlightened manner. From this declaratory nature of a judicial decision, the following rule emerges: An overruled decision is only a failure at true discovery and was consequently never the law; while the overruling one was not ‘new’ law but an application of what is, and had been the ‘true’ law. (Linkletter v. Walker (1965) 381 U.S. 618, 623 [14 L.Ed.2d 601, 605, 85 S.Ct. 1731].)” (Casas v. Thompson (1986) 42 Cal.3d 131, 140, fn. 3 [228 Cal.Rptr. 33, 720 P.2d 921].)
This “myth” of discovered law, as former Chief Justice Roger Traynor characterized it (Quo Vadis, Prospective Overruling: A Question of Judicial Responsibility (1977) 28 Hastings L.J. 533, 535), has long been criticized as unrealistic and out of touch with practical judicial realities. (See, e.g., Levy, Realist Jurisprudence and Prospective Overruling (1960) 109 U.Pa.L.Rev. 1, 4-5 [“No sophisticated legal scholar today would fail to agree that ‘the fiction of mere law-finding by courts is being relegated to the shelf of forgotten things by both judges and jurists,’ and that the ‘creative nature of much judicial activity has become a commonplace’ “]; Casas v. Thompson, supra, 42 Cal.3d at p. 140, fn. 3.) But, although the underlying “Blackstonian” rationale has fallen into disrepute, the rule of retroactivity nonetheless has retained its vitality.
We need not enter the ongoing jurisprudential debate about how to define exactly what courts do when they interpret the law; certain fundamental judicial principles illuminate other reasoned bases for the traditional rule.
Much of the detailed exploration of the rationales underlying principles of retroactivity has taken place in the context of criminal law. The concerns expressed inform but do not necessarily mandate our conclusions in the civil arena. Justice Harlan, for example, in his dissenting opinion in Desist v. United States (1969) 394 U.S. 244, 258-259 [22 L.Ed.2d 248, 261, 89 S.Ct. 1030], laid out certain general principles supporting retroactivity of cases addressing issues of criminal constitutional law: “We do not release a criminal from jail because we like to do so, or because we think it wise to do so, but only because the government has offended constitutional principle in the conduct of his case. And when another similarly situated defendant comes before us, we must grant the same relief or give a principled reason for acting differently. We depart from this basic judicial tradition when we simply pick and choose from among similarly situated defendants those who alone will receive the benefit of a ‘new’ rule of constitutional law. . . . [¶] If a ‘new’ constitutional doctrine is truly right, we should not reverse lower courts which have accepted it; nor should we affirm those which have rejected the very arguments we have embraced.”
Justice Harlan‘s view gained majority favor in Griffith v. Kentucky, supra, 479 U.S. 314, 328 [93 L.Ed.2d 649, 661], in which the United States Supreme Court held that “a new rule for the conduсt of criminal prosecutions is to be applied retroactively to all cases, state or federal, pending on direct review or not yet final, with no exception for cases in which the new rule constitutes a ‘clear break’ with the past.” (Italics added.)5 We are concerned
here with retroactivity of a state tort decision. The Griffith court‘s discussion of some of the underlying principles that lead to general retroactive application is relevant. Nonetheless, because the nature of the underlying claims at issue are so different, as are the considerations relating thereto, we are in no way constrained to follow Griffith‘s absolute rule in the context we now consider.
In his analysis, Justice Traynor suggested that a rigid rule of retroactive application might delay formal overruling of “bad law.” A judge may feel obligated to weigh against overruling a bad rule “the traditional antipathy toward retroactive law that springs from its recurring association with injustice. He must reckon with the possibility that a retroactive overruling could entail substantial hardship. He may nevertheless be impelled to make such an overruling if the hardships it would impose upon those who have relied upon the precedent appear not so great as the hardships that would inure to those who would remain saddled with a bad precedent.” (28 Hastings L.J. at p. 540.) This weighing process may on occasion prevent an overruling of unsound precedent for reasons unrelated to the law itself. (Id., at p. 542.) In order to accommodate this concern, Justice Traynor advocated а technique of “prospective overruling” to be used “[o]nly occasionally,” and “[i]n the hands of skilled judicial craftsmen, acting under well-reasoned guidelines.” (Ibid.)
Reviewing instances of prospective application of decisions, Justice Traynor observed that in most of those cases “prospective overruling was essential to preclude the injustice that retroactive application of the new rule would have entailed.” (28 Hastings L.J. at p. 543; italics added.) Most relevant to our analysis today, in discussing tort cases in particular, he asserted, “it is my opinion that the hardship on parties who would be saddled with an unjust precedent if the overruling were not made retroactive, ordinarily outweighs any hardship on those who acted under the old rule or any benefits that might be derived from limiting the new rule to prospective operation. Neither the tortfeasor nor the victim normally takes account of expanding or contracting rules of tort liability except tangentially in the course of routinely insuring against such liability.” (Id., at pp. 545-546.) These fundamental concepts hold as true today as they have traditionally.
With few exceptions and even after expressly considering suggestions to the contrary, California courts have consistently applied tort decisions re-
Although purporting to adhere most faithfully to the mode of analysis in California decisions, the dissent cites not a single case other than Moradi-Shalal v. Fireman‘s Fund Ins. Companies (1988) 46 Cal.3d 287 [250 Cal.Rptr. 116, 758 P.2d 58] in which this analysis has led to less than full retroactive application of a tort decision. That case involved reinterpretation of a statute we had previously expressly held permitted private third party causes of action for violation of
In Moradi-Shalal, we first cited with approval the general rule affording retrospectivity to judicial decisions ovеrruling prior decisions. We then reiterated the principle that exceptions might be recognized, as, for example, in instances ” ‘where a . . . statute has received a given construction by a court of last resort, and contracts have been made or property rights acquired in accordance with the prior decision, neither will the contracts be invalidated nor will vested rights be impaired by applying the new rule retroactively. [Citation.]’ (Peterson v. Superior Court (1982) 31 Cal.3d 147, 151-152 [181 Cal.Rptr. 784, 642 P.2d 1305].)” (Moradi-Shalal, supra, 46 Cal.3d at p. 305.) We concluded that considerations of “fairness and public policy” required prospective application of the new interpretation to permit those who had already embarked on litigation to receive the benefit of this
As we discuss, in a few additional cases circumscribed retroactivity has been imposed because of unique burdens that would otherwise arise. These cases presented compelling and unusual circumstances justifying departure from the general rule. In contrast, the sum and substance of the dissent‘s argument in this regard is (1) there was a rule of liability developing in the Courts of Appeаl (which admittedly had not reached consensus on the elements of the cause of action); (2) litigants filed actions based on those decisions; and (3) litigants should not be denied their right to proceed with their lawsuit simply because this court disapproved the holdings of the intermediate appellate courts. What this analysis ignores is that every time this court overrules authority developed in the lower courts, but not yet definitively determined, it affects expectations of litigants who stood to gain or lose under the approach taken below.
To proceed in the manner advocated by the dissent would invert the basic rule favoring retroactive application of judicial opinions. The scarcity of tort cases which have been applied only prospectively highlights the fact that under the traditional mode of analysis followed by this court the weight of authority and interpretation has rested firmly on the side of the usual rule of full retroactive application.
As noted, we have long recognized the potential for allowing narrow exceptions to the general rule of retroactivity when considerations of fairness and public policy are so compelling in a particular case that, on balance, they outweigh the considerations that underlie the basic rule. A court may decline to follow the standard rule when retroactive application of a decision would raise substantial concerns about the effects of the new rule on the general administration of justice, or would unfairly undermine the reasonable reliance of parties on the previously existing state of the law. In other words, courts have looked to the “hardships” imposed on parties by full retroactivity, permitting an exception only when the circumstances of a case draw it apart from the usual run of cases.
The caution historically exercised by courts is well demonstrated by the manner in which they have approached departing from the rule of full retroactivity. Thus, when deciding to afford less than full retroactivity, courts have, when possible, formulated circumscribed boundaries fashioned
Nor is it significant that our decision in Foley circumscribed the potential liability of defendants extended under earlier Court of Appeal decisions. Our holding represented no greater “surprise” than that in the numerous tort cases cited above. Each of those cases was applied retroactively to allow litigants in pending cases to have their actions proceed under the controlling rule of law as enunciated by this court. It is difficult to draw a principled distinction depriving tort defendants of the benefits of the now-controlling rule of law, when in the past we have routinely retroactively accorded to plaintiffs the benefits of changes in tort law. However we change a particular equation in the tort arena, it should be uniformly imposed in the absence of compelling reasons to the contrary.
With these concepts in mind, we turn now to the case at bar. The parties do not dispute that our hоldings in Foley covering plaintiff‘s causes of action alleging termination in violation of public policy and in breach of an implied-in-fact contract are consistent with prior law and hence completely retroactive in effect. Nor does defendant dispute that portion of the Court of Appeal‘s order remanding the Tameny cause of action (27 Cal.3d 167) for appropriate amendment if possible. Accordingly, the Court of Appeal‘s reversal of the dismissal of the second, Tameny, cause of action may stand: plaintiff will have another opportunity to allege with sufficient specificity that his termination was in violation of fundamental public policy. (See Foley, supra, 47 Cal.3d at pp. 665-671.) At the same time, we reverse the
Plaintiff contends, however, that the portion of our decision in Foley holding that an action for breach of the covenant of good faith and fair dealing sounds in contract and not in tort falls within that narrow class of cases in which we have permitted an exception to the general rule of retroactivity. He asserts our holding on that issue was wholly unforeseeable, conflicted with existing Court of Appeal authority, and was inconsistent with our own earlier decisions. In addition, plaintiff argues that “considerаtions of fairness and public policy” mandate prospective application of our Foley decision on this point because of the substantial number of litigants who filed tort suits for breach of the covenant of good faith and fair dealing in reliance on Cleary v. American Airlines Inc., supra, 111 Cal.App.3d 443 and its progeny. As we will explain, we disagree.
California cases have used a variety of formulations in approaching the question of whether departure from the general rule of retroactivity is appropriate in a particular case. As we have noted, despite much discussion regarding exceptions, the general rule has held fast in almost all tort cases, although the cases have varied in the emphasis placed on particular factors. For example, some decisions have stated that “resolution of this issue of prospective application turns primarily upon the extent of the public reliance upon the former rule [citation], and upon the ability of litigants to foresee the coming change in the law [citation].” (Neel v. Magana, Olney, Levy, Cathcart & Gelfand (1971) 6 Cal.3d 176, 193 [98 Cal.Rptr. 837, 491 P.2d 421] [giving retroactive effect to holding that cause of action for legal malpractice does not accrue until client discovers or should discover relevant facts].) On the other hand, the Li case, as discussed, placed more emphasis on problems relating to the administration of justice. (13 Cal.3d at p. 829.)
In Peterson v. Superior Court, supra, 31 Cal.3d 147, 152, Justice Broussard undertook to provide the “proper guide for deciding whether to apply an overruling [civil] decision retroactively” by detailing how reliance on
Plaintiff asserts that our opinion should not be applied retroactively because it was unforeseeable. Whether or not one characterizes our decision as a “new” rule of law, it is undisputed that it did not overrule a prior decision of this court. (Compare Moradi-Shalal, supra, 46 Cal.3d 287.) Moreover, as we explained above, tort cases giving rise to new rules of law have сonsistently been afforded full retroactive effect in our state‘s jurisprudence. (Ante at pp. 981-982.) As we shall discuss, what is most relevant is not the mere fact of the “novelty” of the rule adopted, but rather the reliance of parties on the preexisting state of the law.
Although our Foley decision overruled a consistent line of Court of Appeal cases holding that some actions based on the implied covenant of good faith and fair dealing in the employment context could give rise to tort damages (e.g., Cleary, supra, 111 Cal.App.3d 443; Crosier v. United Parcel Service, Inc. (1983) 150 Cal.App.3d 1132 [198 Cal.Rptr. 361]; Khanna v. Microdata Corp. (1985) 170 Cal.App.3d 250 [215 Cal.Rptr. 860]; Koehrer v. Superior Court (1986) 181 Cal.App.3d 1155 [226 Cal.Rptr. 820]), the Cleary doctrine stood for less than six years before we granted review to consider the issue. We are not persuaded that this is the kind of “longstanding” lower court rule that justifies nonretroactivity in the absence of compelling additional reasons.
Because the relevant portion of Foley did not address an area in which this court had previously issued a definitive decision, from the outset any reliance on the previous state of the law could not and should not have been viewed as firmly fixed as would have been the case had we previously
Plaintiff also claims that seeking tort damages for breach of the covenant of good faith and fair dealing in the employment context was “a practice impliedly sanctioned by prior decisiоns of this court.” (See People v. Guerra (1984) 37 Cal.3d 385, 401 [208 Cal.Rptr. 162, 690 P.2d 635].) In Tameny v.
Moreover, whether or not Foley established a new and unforeseeable rule of law, of major relevance to our inquiry are the purposes behind the new rule, and, even more important, the reliance of parties on the preexisting state of the law. Both factors weigh heavily against making an exception to the usual rule of retroactivity.
Our Foley holding on the covenant of good faith and fair dealing issue had two primary motivations and goals. First, we focused on the distinction between tort and contract remedies and the importance of giving effect to the true expectations of the parties to a contract. As we noted, “[w]hereas contract actions are created to enforce the intentions of the parties to the agreement, tort law is primarily designed to vindicate ‘social policy.’ [Citation.]” (Foley, supra, 47 Cal.3d at p. 683.) To that end, we observed, “predictability about the cost of contractual relationships plays an important role in our commercial system” and traditional contract damages are aimed at compensating the aggrieved party rather than punishing the breaching party. (Ibid.) Moreover, we noted, permitting tort recovery for breach of the covenant would create “the anomalous result that henceforth the implied covenant in an employment contract would enjoy protection far
With these concerns in mind, we placed the covenant of good faith and fair dealing in the employment context in its traditional position as “an ‘ex contractu’ obligation, namely one arising out of the contract itself. The covenant . . . is read into contracts in order to protect the express covenants or promises of the contract, not to protect some general public policy interest not directly tied to the contract‘s purposes.” (Foley, supra, 47 Cal.3d at p. 690, italics added.) Under traditional contract damage principles, employers who breach the covenant of good faith and fair dealing may be expected to restore to an employee the full “benefit of the bargain” entered into by the parties. As in other contract contexts, however, they will not be required to pay tort damages based on an independent legal duty neither explicitly nor implicitly contemplated by the parties. Foley‘s reaffirmation that the focus of implied covenant of good faith and fair dealing actions rests in the expectations of the parties is fully consistent with retroactive application of our decision to contracts entered into before that decision was filed.
Another concern expressed in Foley was that permitting tort remedies for breach of the covenant tended to undermine “prеdictability of the consequences of actions related to employment contracts.” (Foley, supra, 47 Cal.3d at p. 696.) We noted that such a lack of predictability may adversely affect business stability, observing that (i) jury verdicts in these cases had often been volatile and unpredictable (id., at pp. 695-696 & fn. 33) and (ii) in light of the tort allegations, “these actions could rarely be disposed of at the demurrer or summary judgment stage.” (Id., at p. 697.) Not only does retroactive application of Foley generally ameliorate these concerns, but also permitting further proceedings despite the lack of a clear standard for establishing a breach giving rise to tort damages would threaten continued impairment of these interests.
As we have noted, a major component of analyses looking to possible exceptions to the usual rule focuses on the extent of reliance by litigants on the former rule. (Peterson, supra, 31 Cal.3d at p. 152.) The most compelling example of such reliance occurs when a party has acquired a vested right or entered into a contract based on the former rule, and we are more reluctant to apply our decisions retroactively in those cases. (See ibid.; County of Los Angeles v. Faus (1957) 48 Cal.2d 672, 681 [312 P.2d 680].) We are not faced with such a situation here. It is most unlikely that any employee in a pending wrongful termination case entered into his or her employment in reliance on the existence of a tort cause of action for breach of the covenant, and plaintiff here does not claim to have done so. (See
It is true that courts on occasion have been more sympathetic to a litigant‘s plight when the subsequent decision completely bars the litigant‘s claims, as, for example, where a subsequent change in a procedural rule would work to bar a cause of action filed in reliance on the former rule. In Chevron Oil Co. v. Huson (1971) 404 U.S. 97 [30 L.Ed.2d 296, 92 S.Ct. 349], the United States Supreme Court overruled a series of Circuit Court of Appeals precedents holding that federal rather than state law determines the timeliness of a personal injury action under a federal statute (
By contrast, our decision in Foley is not a matter of procedural interpretation but a substantive rejection of a form of recovery. Moreover, our holding there will not alone deprive an employee of his “day in court” on a covenant of good faith and fair dealing claim. Neither will it necessarily deprive him of “any remedy whatsoever.” On the contrary, an employee may still seek recovery for a claim based on the covenant and any other properly pleaded contract breach. He is limited only in the nature of his potential recovery, i.e., to contract damages unless he can show some other
In this sense, plaintiff‘s claim resembles that in Peterson, supra, 31 Cal.3d 147. There, we were asked to deny retroactive application to our holding in Taylor v. Superior Court, supra, 24 Cal.3d 890 that punitive damages are recoverable from an intoxicated driver who causes personal injury. We rejected claims by the Peterson defendant that the Taylor decision should be prospectively applied in light of its unforeseeability as well as detrimental reliance by litigants and their insurers. We also rejected the related claim that retroactive application of Taylor would violate “the principle underlying the ex post facto clauses of the United States and California Constitutions” by imposing a civil penalty without first providing fair warning of the conduct prohibited. (Peterson, supra, 31 Cal.3d at pp. 159-162.) In regard to the latter contention, Justice Broussard, writing for the majority, persuasively explained: “California courts have routinely applied overruling decisions retroactively even though such decisions redefined the duty owed, thus the conduct prohibited. [Citations.] Although one could draw a distinction between expansion of liability for compensatory damages and increasing punishment by imposition of punitive damages, the effect is the same: exposure to a form of damages for which the defendant was not previously liable . . . . [I]n this instance, the increased liability is merely a change in the remedy for enforcing defendant‘s obligation to refrain from drunk driving, not a change in the nature of the obligation itself.” (Id., at pp. 161-162, italics added.)
Similarly, Foley did not change the nature of an employer‘s obligation under the contract, including adherence to the implied covenant of good faith and fair dealing. The employer remains bound by all express and implied terms оf the contract, and any breach thereof is still actionable. Foley simply changed the nature of the remedy available for the breach.9
Next, we believe that considerations involving the “administration of justice” also favor retroactive application of Foley. First, as to those cases in
Last, and also telling, we reiterate that the Courts of Appeal never reached a consensus on what sufficed for a claim of tortious breach of the implied covenant in the employment context. The differences of opinion and the general confusion in the case law are well documented. (See generally Huber, supra, 841 F.2d 980, 983-986; Cox v. Resilient Flooring Div. of Congoleum Corp. (C.D.Cal. 1986) 638 F.Supp. 726, 737 [“The development of [the wrongful termination] rules, not always consistently applied and invariably fuzzy around the edges, has served further to confuse both plaintiffs and defendants as to the real issues“].) Indeed, Foley itself reviewed at
III. CONCLUSION
We conclude there is no compelling reason to depart from the general rule of retroactive application of judicial decisions in this case. Nothing distinguishes the present matter from other cases in which this court has delineated the scope of a cause of action or the relief available therefor to justify deviation from the usual rule. Accordingly, we hold that Foley v. Interactive Data Corp., supra, 47 Cal.3d 654, shall be given full retroactive effect as to all cases not yet final on January 30, 1989, the date that decision became final.
We therefore affirm the Court of Appeal‘s judgment insofar as it remands this matter to the trial court with instructions to grant plaintiff a reasonable time within which to file an amended complaint sufficiently alleging a discharge in violation of public policy. (Foley, supra, 47 Cal.3d at pp. 670-671; Tameny, supra, 27 Cal.3d 167.) The Court of Appeal‘s judgment is reversed insofar as it affirms dismissal based on the bar of the statute of frauds of the cause of action alleging a breach of an oral contract not to discharge except for good cause. (Foley, supra, 47 Cal.3d at pp. 671-675.) The Court of Appeal‘s judgment is also affirmed insofar as it affirms dismissal of the cause of action seeking tort damages for breach of the implied covenant of good faith and fair dealing; on remand, however, plaintiff may amend his cause of action to allege a traditional breach of the implied covenant giving rise to contract damages.
Panelli, J., Eagleson, J., and Arguelles, J.,* concurred.
BROUSSARD, J.-I dissent from the majority‘s holding giving retroactive effect to the portion of their opinion in Foley v. Interactive Data Corp.
* Retired Associate Justice of the Supreme Court sitting under assignment by the Chairperson of the Judicial Council.
In Moradi-Shalal v. Fireman‘s Fund Ins. Companies (1988) 46 Cal.3d 287 [250 Cal.Rptr. 116, 758 P.2d 58] (hereafter Moradi-Shalal), this court overruled Royal Globe Ins. Co. v. Superior Court (1979) 23 Cal.3d 880 [153 Cal.Rptr. 842, 592 P.2d 329], the decision which established a cause of action under
Amazingly, the majority make no attempt to distinguish Moradi-Shalal, the most recent and pertinent precedent.1 They merely say that it was an exceptional case, as if only cases which follow general rules are based on legal reasoning, and those which craft exceptions to the rules are mere judicial caprice. Apparently the majority do not view Moradi-Shalal as a decision which established or applied a principled exception to the general rule of retroactivity, but instead see it as an aberrant, arbitrary decision without precedential value.
The majority accuse us of trying to transform Moradi-Shalal into a standard applicable to all cases.2 (Ante, p. 983.) But we do not claim Moradi-
But even if we follow the majority‘s lead and disregard Moradi-Shalal, the standards established by prior California decisions and followed by the majority today compel the conclusion that the Foley holding should not be applied retroactively.4 Under that standard, we must first determine whether the decision in question creates a “new rule of law” (Donaldson v. Superior Court (1983) 35 Cal.3d 24, 36 [196 Cal. Rptr. 704, 672 P.2d 110]); if it does, we inquire into “(a) the purpose to be served by the new standards, (b) the extent of the reliance . . . on the old standards, and (c) the effect on the administration of justice of a retroactive application of the new standards.” (Peterson v. Superior Court, supra, 31 Cal.3d 147, 152, quoting Stovall v. Denno (1967) 388 U.S. 293, 297 [18 L.Ed.2d 1199, 1203, 87 S.Ct. 1967].)
Did Foley create a new rule of law? The majority equivocate, but the answer is clear. The decision in Foley abolishing a cause of action for bad faith discharge established a new rulе of tort law. That ruling was unsupported by California precedent. It overruled seven Court of Appeal opinions. (Cleary v. American Airlines, Inc. (1980) 111 Cal.App.3d 443 [168 Cal.Rptr. 722]; Crosier v. United Parcel Service, Inc. (1983) 150 Cal.App.3d 1132 [198 Cal.Rptr. 361]; Shapiro v. Wells Fargo Realty Advisors (1984) 152 Cal.App.3d 467 [199 Cal.Rptr. 613]; Rulon-Miller v. International Business Machines Corp. (1984) 162 Cal.App.3d 241 [208 Cal.Rptr. 524]; Khanna v. Microdata Corp. (1985) 170 Cal.App.3d 250 [215 Cal.Rptr. 860]; Gray v. Superior Court (1986) 181 Cal.App.3d 813 [226 Cal.Rptr. 570]; Koehrer v. Superior Court (1986) 181 Cal.App.3d 1155 [226 Cal.Rptr. 820].) It rejected the characterization of California law by the Ninth Circuit (Huber v. Standard Ins. Co. (9th Cir. 1988) 841 F.2d 980) and by numerous commentators
The majority stress that Foley did not overrule a decision of this court, yet they recognize that questions of retroactivity arise not only when we overrule our own prior decision, but also in two other contexts: when the decision “disapproves a practice impliedly sanctioned by prior decisions of this court” or “disapproves a longstanding and widespread practice expressly approved by a near-unanimous body of lower-court authorities.” (People v. Guerra (1984) 37 Cal.3d 385, 401 [208 Cal.Rptr. 162, 690 P.2d 635]; see maj. opn. at pp. 980-981.) Both fit the circumstances of the present case.
The majority assert that the practice of permitting tort recovery for bad faith discharge was not “impliedly sanctioned” by this court because we never expressly approved the practice. But “impliedly sanctioned” does not mean “expressly approved“; it means “tacitly permitted.” When this court declines to review a consistent line of Court of Appeal decisions (finally granting review only when a decision adopts an extremely restrictive view of tort liability), permits those decisions to remain published, cites those cases without hint of disapproval, and goes so far as to approve the theory on which they rest,5 I conclude that we have impliedly sanctioned the practice in question.
The majority recognize that Foley overruled a consistent line of Court of Appeal cases, but maintain that the tort recovery permitted by those cases was not a long-standing practice.7 Nine years elapsed between the filing of Cleary v. American Airlines, Inc., supra, 111 Cal.App.3d 443, the first decision upholding a tort action for bad faith discharge, and the filing of our
How long is long enough? I suggest the answer, based on the interests served by a decision limiting retroactivity, is long enough that people can and do reasonably rely on the practice. The majority agree: “what is most relevant is not the mere fact of the ‘novelty’ of the rule adopted, but rather the reliance of parties on the preexisting state of the law.” (Ante, p. 986.) The preexisting rule permitting a tort cause of action for bad faith discharge related to a type of dispute, the assertedly wrongful firing of a worker, which arises frequently. It impacted upon every aspect of the dispute, from the employee‘s decision whether to initiate an action (and the attorney‘s decision whether to take the case) through, pleading, discovery, settlement negotiation, trial, and appeal. Under these circumstances, nine years, or even six, is sufficient to engender significant reliance.
Since the decision in Foley disapproved a practice supported by a longstanding line of lower court authority and impliedly sanctioned by this court, it represents the kind of dramatic break from prior practice which raises a serious question whether “fairness and public policy” preclude retroactivity. (Peterson v. Superior Court, supra, 31 Cal.3d 147, 152.) As we noted earlier (ante, p. 995), our inquiry into that question requires us to consider (1) the purpose to be served by the new rule, (2) the extent of reliance on the former rule, and (3) the effect on the administration of justice. (Peterson v. Superior Court, supra, 31 Cal.3d at p. 152; Casas v. Thompson (1986) 42 Cal.3d 131, 140 [228 Cal.Rptr. 33, 720 P.2d 921].)
We begin, as do the majority, with the purpose of the new rule. The majority identify two purposes served by the decision in Foley. The first is
Another purpose of the Foley decision, the majority say, was to enhance the “predictability of the consequences of actions related to employment contracts.” (Ante at p. 989, quoting Foley, supra, 47 Cal.3d at p. 696.) This purpose even more clearly points to a prospective application of the decision. One can only predict the future. Nothing we do can alter or facilitate past predictions. All we can do is fulfill or disappoint them. And the retroactive application of Foley will necessarily disappoint past predictions in which parties, relying on existing law, decided whether to file or defend suits, whether to accept or reject settlements, and made other decisions incident to litigation.
Under the format established by prior cases, a format we and the majority both follow, the next consideration in our inquiry whether considerations of fairness and public policy preclude retroactivity of the new rule is the extent of the reliance on the former rule. In my dissent in Foley, I explained the extensive reliance on the now-overruled Court of Appeal decisions: “Employers have revised personnel policies and purchased insurance policies. Insurers have calculated and collected premiums. Attorneys have been hired and trained, even entire law firms have been established. Litigants have filed suits, accepted settlement offers, rejected other offers, gone to trial, and appealed. Hundreds of cases are proceeding before the trial courts in which both parties have based their strategy on the assumption that a tort action exists. Many others [are] pending in the Court of Appeal.” (Foley, supra, 47 Cal.3d at p. 706 (Broussard, J., dis.).)
The majority did not dispute these facts in Foley and do not dispute them now. In fact the majority never discuss the extent of reliance on prior law.
Among their peripheral observations is the suggestion that Foley did not deprive the employee of all remedies whatsoever.11 They do not discuss whether the remedies that remain will provide a worker discharged in bad faith with adequate recovery, or even with sufficient damages to enable him to hire counsel. Yet, when this issue was discussed in Foley the majority recognized that the remaining remedies might be insufficient. (See Foley, supra, 47 Cal.3d 654, 669-700.)12
The last consideration in our inquiry is the effect of retroactivity on the administration of justice. Here there can be no dispute that retroactive application of Foley will require retrial of many cases now pending on appeal. The only question is how many. The majority hope that in many cases the jury will have rendered separate verdicts on tort or contract damages, and suggest that in such cases the court could simply strike the tort verdict. Such action, however, could be quite unfair to plaintiffs who, confident of their tort cause of action, made no attempt to seek jury instructions on contract damages for foreseeable emotional distress.13
In sum, the majority opinion is riddled with problems, but two stand out. First, it offers no grounds for distinguishing Moradi-Shalal, which just a few months ago held that fairness to plaintiffs who had relied on prior law justified making our holding prospective. Second, all of the majority‘s reasoning about reliance is as insubstantial as mist against the solid fact of extensive and reasonable reliance on pre-Foley precedent, a fact they cannot deny. The majority‘s refusal to protect such reliance by making its decision in Foley prospective will be catastrophic to the wrongfully discharged worker who relied upon the unanimous line of pre-Foley decisions in seeking redress for his wrong.
Mosk, J., and Kaufman, J., concurred.
Notes
Griffith, and its apparently rigid rule, dealt with retroactivity of federal criminal procedural decisions. Teague v. Lane, supra, 489 U.S. 288 [103 L.Ed.2d 334] has already demonstrated that the high court‘s approach is not as inflexible in other contexts. Pеople v. Bustamante (1981) 30 Cal.3d 88, 102 [177 Cal.Rptr. 576, 634 P.2d 927], held that a rule permitting counsel to be present at preindictment lineups should be given prospective application, in spite of the fact that this court had expressly refused to decide the issue, because prosecutors, police and courts had relied on prior Court of Appeal decisions.
One reading this paragraph would think that the issue on which the court divided in Foley was one of alternative contract remedies. But in fact the justices agreed unanimously on the contractual duties of the parties and the remedies for breach. The issue which divided us was tort duties arising from the employer-employee relationship, and remedies for their breach. The majority opinion in Foley abolished both the duties and the remedies.